US economy to continue slow expansion this year

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LAS VEGAS, Nev. – Truckable economic activity (TEA), a measure of the trucking industry’s health, is expected to grow in 2017 at a slightly stronger rate than last year.

That was the message from Robert Dieli, president, RDLB Inc., who provided an economic overview at Heavy Duty Dialogue here this week. TEA is comprised of four components: consumption; exports; imports; government spending; and business investment. It is designed to better reflect those aspects of GDP that directly affect demand for trucking services. A key difference is that imports are viewed favorably, as they contribute freight demand.

“TEA and GDP track each other, with TEA generally outperforming GDP in expansions. The flip side is, it severely underperforms GDP in recessions,” Dieli explained. “TEA growth will be positive (in 2017), slightly larger than last year, in part because of aspects related to business and consumer confidence that we’ve already seen in the fourth quarter.”

Dieli is expecting the slow expansion of the US economy to continue through 2017. However, he also noted this is now the fourth longest stretch of economic growth in US history, soon to become the third longest. Typically, TEA predicts economic recessions.

“TEA is an early and enthusiastic participant in recessions,” Dieli said. “There has not been a recession in which TEA has not been a participant.”

Dieli is not expecting the Trump administration to have an immediate impact on trucking.

“Anything that involves legislative action are things that can take months,” he said, noting the Ronald Reagan tax cuts took a year to enact and put into place. “Were they to decide today on a particular set of priorities, it would take a while,” he added. However, Dieli noted a crackdown on imports would have a negative affect on trucking.

Bill Strauss, senior economist and economic advisor with the Federal Reserve Bank of Chicago, also predicted slow economic growth in the US through 2017. Asked if it’s possible for Trump to live up to promises of sustained GDP growth of 3-4%, Strauss expressed some doubt.

“It’s very difficult,” he said, noting there’s little room for labor force growth given the current low rate of unemployment. Strauss said it may be possible to achieve 3-4% growth for a year or two, but it will be difficult to sustain it long-term.

Still, some growth is likely to be achieved this year, Strauss said.

“Our view is the economy is going to grow this year, a bit better than last year,” he said. “But it’s not going to be anything of a substantial note.”

US GDP grew at about 1.7% in 2016, with Q4 data yet to be released. This is the eighth year of economic expansion, albeit at a slow rate. “If we go to the end of 2019 without a recession, it will have been the longest expansion in US history,” Strauss pointed out.

A lack of business investment continues to weigh on economic growth, but Strauss senses that is changing and there could be a greater appetite among businesses to invest this year. To sum up, Strauss said: manufacturing growth has been flat, but not in recession; the outlook for the US economy is to continue to expand at a slow trend-like pace through 2019; employment will rise moderately with the unemployment rate remaining low; and manufacturing output in the US will increase at a rate below trend this year and into 2018.